Investors Have Become More Selective About Alcohol Investments — for Now

Ruchi Desai has experienced firsthand the recent mood shift in beverage-alcohol investment. In 2021, in her role as co-founder and CEO of beer brand Elite Eight Lager, she raised an initial $5 million for the company over the course of six weeks. In December 2024, just three years later, it took her nine hard-fought months to raise $10 million in series A funding.

“During Covid, people were drinking more, so everyone had a higher awareness of alcohol. …There was a lot of capital and there was a lot of frothiness both in valuations and ease of raise, and that has all settled,” says Desai, who founded early-stage venture fund Rising Tide Ventures last year. “It’s almost like the beer has gone flat.”

The economic climate that allowed Casamigos to sell for $1 billion in 2017, Patrón for $5.1 billion in 2018, and Aviation Gin for $610 million in 2020 has receded. Today, the general investor sentiment around alcohol is more subdued. Data published by Capstone Partners shows annual declines in beverage industry deal-making since a high point in 2021. Mergers and acquisitions did rebound slightly in 2024, though many of them were related to wholesaler consolidation or were strategic buys of underperforming brands.

Pronghorn, a Diageo-backed accelerator that aims to develop Black-owned spirits companies, has slowed its rates of investment in recent years. President Ron Cole told Brewbound that Pronghorn is shifting its attention to brands with a more proven track record of growth, ones that are not at the “very beginning of their journey, but maybe a third of the way there.” Recent busts — like Vintage Wine Estates’ $600 million IPO in 2021 and subsequent bankruptcy just three years later — are still fresh, and causing some capital to wait on the sidelines when it comes to alcohol brands.

“Investments that were done at those really hefty valuations and their failure to live up to expectations, … it’s been a little bit sobering, if you can pardon the pun,” says Stephen Rannekleiv, global strategist for beverages at Dutch financial services firm Rabobank.

Investors’ reasons for reticence are varied. Interest rates above 4 percent have slowed deal-making in many economic sectors, not just alcohol. But booze has its own specific set of challenges: consolidation among wholesalers and retailers, a proliferation of new mood-altering products like THC beverages and adaptogenic sodas, plus Covid’s confusing effects on Americans’ purchasing habits. All are a drag on investor appetite, particularly when it comes to early-stage brands. Some investors are even asking whether drinking is on its way out entirely. It’s where they land on that question that determines whether — and where — they’re spending money in alcohol right now.

“It really comes down to: Do you read the headlines or do you read [deeper]?” says Brian Rosen, founder and managing partner at InvestBev, a private equity firm specializing in adult beverages. “The headlines were: Alcohol causes cancer. But what you don’t read as much about is that Warren Buffett, the best investor in history, invested $2 billion into Constellation the same year.”

Rosen’s bullish stance on alcohol might make him a contrarian in certain finance circles, but he’s certainly not alone. New reports have given credence to the idea that Gen Z isn’t giving up drinking in the ways some headlines have suggested. In April, Rabobank published research whose top-line finding was that Gen Z’s lower levels of alcohol consumption now are mostly related to financial pressures, and will likely increase greatly as they age and earn more. And in June, alcohol data company IWSR released a report headlined “younger legal-drinking-age consumers are re-engaging with alcohol.” Its BevTrac consumer research found the portion of Gen Z that reported drinking within the past 6 months rose from 46 percent to 70 percent between April 2023 and March 2025.

If overall U.S. alcohol sales are down — single-digit declines for the next few years seems a consensus bet — it doesn’t signal that the sky is falling. Instead, it necessitates smarter bets on companies that can survive in this harsher environment.

These findings don’t surprise Noah Sanborn Friedman, co-founder and managing partner of Top Shelf Ventures, a venture and private-equity fund focused on alcohol and broader vice products. Sanborn Friedman says that among his cohort — which he affectionately refers to as “Twitter and tech bros” — it’s fashionable to express a disdain for alcohol and to publicly downplay its future. Privately, though, he believes it’s a different story.

“The truth is, as much as people like to talk online about how they think no one drinks anymore, you get a couple of cocktails in them and then they’re like, ‘Dude, you’re so right. It’s total nonsense,’” Sanborn Friedman says. “Alcohol is built into habit, ritual, and culture in ways that other things aren’t.”

This is one of the core arguments that proponents of alcohol’s future will make: Alcohol fulfills an innate human desire for connection, socialization, and mood alteration that goes back thousands of years. Whether or not people are drinking, they say, isn’t changing so much as what we drink is changing. Wine is on the decline while ready-to-drink cocktails are on the rise, and craft beer volumes are declining as non-alcoholic beer gains steam. All of this points to a more measured investor approach to the alcohol space. If overall U.S. alcohol sales are down — single-digit declines for the next few years seems a consensus bet — it doesn’t signal that the sky is falling. Instead, it necessitates smarter bets on companies that can survive in this harsher environment. Outside of brands, there are still plenty of deals happening in the alcohol distribution and manufacturing spaces, including Asahi’s purchase of co-packing facility Octopi Brewing in January 2024 and Hand Family Companies’ acquisitions of wholesalers in Southern California earlier this year.

It’s why even alcohol industry boosters aren’t sticking only to legacy categories like luxury wine or light lagers. Top Shelf Ventures has invested in growing categories including hemp-derived THC beverages, which the company is betting will eventually be regulated, sold, and consumed like alcohol. For its part, InvestBev has recently backed “clean energy” brand Lucky Energy, and has repeatedly invested in hard kombucha and RTD cocktail brand JuneShine as well as hemp-derived THC beverage company Cann. If the Federal Reserve follows through on the two interest rate cuts it has signaled for the year, Rosen expects more acquisitions of growing brands in the better-for-you, non-alcoholic, and hemp beverage lanes.

“This is definitely a correction in the alcohol market and it’s definitely going to weed out a lot of the brands that hadn’t made it to the right scale yet, or inefficient operators or brands that didn’t have a reason to exist.”

The reason this selective approach to deal-making feels like such a departure is because, well, it is. In contrast to the bonanza of four or five years ago, today’s buyers are taking what Rannekleiv calls a “horses for courses” approach, selecting companies that make strategic sense for their portfolios. (He cites Constellation’s sale of six wine brands and production facilities to The Wine Group in April as an example.) Chase Brooks, founder and general manager of draft cocktail solutions company Solid Liquid, says that investor caution around alcohol no doubt causes some short-term pain for brands looking to raise money. But ultimately, it makes for a more competitive and healthy industry landscape than the easy capital he found when raising funds for a prior alcohol brand in 2018.

“This is definitely a correction in the alcohol market and it’s definitely going to weed out a lot of the brands that hadn’t made it to the right scale yet, or inefficient operators or brands that didn’t have a reason to exist,” Brooks says.

Debate over the future of alcohol consumption in America, and particularly the questions around how Gen Z will mature, remain on the minds of investors. As Gen Z and, behind them, Gen Alpha age into their 20s and 30s, the industry will gain clarity on just how different — or similar — their habits are to their parents’ and grandparents’. And if lower drinking levels do turn out to be the norm, that hardly spells the end of the multibillion-dollar industry. It just makes for a more Darwinian environment for new and established brands alike.

“The alcohol category is massive. Even if we go through five or 10 straight years of single-digit decline, it will still be massive,” Brooks says. “It will just be, in my opinion, a more honest market where you have to do a lot of battle to survive.”

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